Costco is well-known for its rotisserie chicken, which has remained at the unbeatable price of $4.99 since 2009. This price has been maintained despite inflation and rising production costs, leaving many to wonder: why is Costco chicken so cheap?
Costco’s chicken is so cheap because of its strategic business model and control over its supply chain. Costco uses a “loss leader” strategy where it sells its rotisserie chicken at a loss to attract customers who will then buy other items with higher profit margins. Additionally, by controlling its own supply chain, Costco is able to save costs and sell its chicken at a lower price.
Costco’s Business Model
Costco’s business model uses its low prices on certain products, including rotisserie chicken, to drive membership and sales. This is a strategic approach known as the “loss leader” strategy. The company sells the chicken at a loss, with the aim of attracting customers to the store who will then often buy other items with higher profit margins.
In 2015, Costco’s CFO Richard Galanti stated that the company was willing to sacrifice “$30 million, $40 million a year on gross margin” by keeping the chicken’s price at $4.99. Despite the losses, Costco has maintained the $4.99 price for its rotisserie chicken to inspire brand loyalty and keep customers coming back for more than just the chicken.
Control Over the Supply Chain
In 2019, Costco set up its own feed mill, hatchery, and slaughter plant in Nebraska, contracting nearby farmers to raise over 100 million birds each year under the name Lincoln Premium Poultry (LPP). By controlling the entire supply chain, from hatching to feeding, shipping, and cooking, Costco reportedly saves up to $0.35 per rotisserie chicken.
This move allowed Costco to source its chicken at even lower margins, potentially saving the company up to 35 cents per bird. The company considers the rotisserie chicken a “loss leader,” meaning its purpose is not to bring in profits but rather to attract customers to buy more of the wholesale retailer’s other products.
Quality Standards and Farming Practices
Costco adheres to the Department of Agriculture’s standards for its organic birds, which means they live in less crowded conditions than conventionally raised chickens and have access to the outdoors. However, the majority of Costco’s chickens, including the popular rotisserie chickens, are raised on factory farms in windowless buildings with tens of thousands of birds.
Despite these conditions, Costco has made some improvements compared to conventional chicken companies, such as using a more humane slaughter method called controlled atmosphere stunning at its Nebraska plant.
Nutritional Value and Taste
Despite its low price, Costco’s rotisserie chicken doesn’t compromise on taste. In a taste test conducted by Eat This Not That, Costco’s chicken was praised for its seasoning, juiciness, and overall taste, scoring a 9/10. However, it is important to note that Costco’s rotisserie chicken has a higher sodium content compared to some other brands.
In conclusion, Costco’s low-cost chicken can be attributed to its strategic business model, control over its supply chain, and its willingness to use the product as a loss leader. Despite some concerns over animal welfare and high sodium content, Costco’s rotisserie chicken remains a popular choice due to its affordable price and tasty flavor.
Frequently Asked Questions
How many calories are in a Costco rotisserie chicken?
A serving of Costco’s rotisserie chicken, which is about 3 ounces, contains approximately 140 calories.
Are Costco rotisserie chickens gluten-free?
Yes, Costco’s rotisserie chickens are gluten-free. However, if you have a severe gluten allergy, it’s always best to check with the store as recipes and suppliers can change.
Can you buy Costco rotisserie chicken without a Costco membership?
No, you need a Costco membership to purchase items, including the rotisserie chicken, from inside the store. However, non-members can still buy items from the Costco food court.
Does Costco sell raw chickens?
Yes, Costco does sell raw chickens in bulk. These are usually sold in packages of two or more.
How long does a Costco rotisserie chicken last in the fridge?
A Costco rotisserie chicken should be consumed within 3 to 4 days if stored properly in the fridge. If you can’t eat it within that time frame, it’s best to freeze it.